Jet2 raises £422m to help weather pandemic

Jet2 said on Friday that it has raised around £422m in a placing to help the airline and holiday company to weather the Covid-19 pandemic and related restrictions.

The fundraising was "significantly oversubscribed", Jet2 said. It comprised 35.2m placing shares and subscriptions for 593,561 retail shares, all of which were placed at 1,180p each, which is a 9.1% discount to the closing share price on Thursday.

Jet2 highlighted risks around the timing of the restart of flights, which are currently suspended until 15 April and uncertainty over its continued eligibility for the UK Covid Corporate Financing Facility. In May 2020, the company was eligible to draw down £300m but since then, the eligibility criteria have changed. The airline also noted that its banking covenant waivers are conditional upon raising new equity.

Executive chairman Philip Meeson said: "The board is grateful to both existing shareholders and new investors for their significant support of this equity issue. Based on the indicative scenario planning undertaken by management, the board believes that the proceeds will provide sufficient liquidity on an extended and likely unpredictable shutdown basis to deal with this continually challenging trading environment.

"Furthermore, the directors believe the fundraise will enable management to continue to adopt a decisive, but prudent, responsible financial management approach; take longer-term strategic decisions to support sustainable long term profit growth; and improve the ability for Jet2 to exit the pandemic in a stable commercial position so that it is well positioned to capitalise on the upturn opportunity when it arrives."

At 0945 GMT, the shares were down 7.8% at 1,197p.

Russ Mould, investment director at AJ Bell, said: "While those taking part in the Jet2 share placing got the stock in a 9%-off sale, there is still a leap of faith in backing a business whose near-term prospects are clouded by uncertainty caused by travel restrictions."

Broker Peel Hunt said: "There is a high availability of airline capacity for S21, but it is possible that the continuing lockdown and ongoing messaging from the government not to book holidays will force other holiday operators out of business, allowing Jet 2 to increase its market share. EasyJet would also be a major beneficiary of reduced holiday capacity, having relaunched its holiday business in 4Q19."